Chinese PM dismisses EU criticism

China's Prime Minister Wen Jiabao, left, shakes hands with European Commission President Jose Manuel Barroso during an EU China cultural exchange at EU headquarters in Brussels on Wednesday, Oct. 6, 2010. The EU and China meet for a formal summit on Wednesday to discuss the trade gap and currency issues.

Chinese Prime Minister Wen Jiabao on Wednesday dismissed criticism from European officials of his country's economic and financial policies, ending a day of talks at the EU headquarters on a sour note.

The mood began to darken on Tuesday at the EU-China business leaders meeting when Olli Rehn, the EU's monetary affairs chief, warned that a recent rise in the value of the euro against the yuan could hamper Europe's modest economic recovery. A strong local currency makes exports more expensive and less competitive on the global market.

The EU urges Beijing to let its currency fall against the dollar and the euro and to open China to foreign business. Rehn's comments echoed officials in the U.S., where Congress is threatening to impose trade sanctions if Beijing doesn't loosen its firm grip on the yuan.

Wen told the meeting Thursday that the rise in the euro against the yuan stemmed from fluctuations in the euro-dollar exchange rate, not Chinese intervention in the currency markets.

"Why should this blame be put on China?," he asked. He added Europe "should really ask this question to the United States."

He stressed that Beijing stands by its promise of June 19 to give market forces more influence on its exchange rate, but said a sharp rise in the yuan would be disruptive to the Chinese economy.

Wen also pointed to contradictions in Europe, which called for an appreciation of the yuan against the euro, while thanking Beijing for buying Greek government bonds once the debt-stricken country returns to the market — a move that would prop up the value of the euro.

"The European Union is our strategic partner," Wen said. "When some countries in the euro zone ran into difficulties, we did not stand by idly ... we purchased large quantities of Eurobonds on the past."

Manuel Barroso, the head of the EU's executive Commission, and Herman van Rompuy, the EU president who met with Wen later, also used the term "strategic partnership" frequently. But they said China's burgeoning economic clout requires Beijing to be mindful of the needs of its global partners.

In a gentle jab, Barroso told Wen that "with great power comes great responsibility." Separately, Van Rompuy said the EU and China have "commonalities, but ... also differences. This should not impede" the search for ever better ties, he added.

The later meeting at the EU headquarters ended with the cancellation of a joint press conference. European officials said Wen wanted only to read a statement, not take questions from the news media.

The EU-China meeting produced no breakthrough although it was seen as a key stop ahead of next month's meeting in Seoul of the Group of 20 rich and developing nations. At that gathering, world leaders will seek to address global trade imbalances and resolve major regulatory issues in the wake of the 2008 financial crisis.

European officials complain about China's large trade deficit and the small role domestic demand plays in its growth model.

But, Wen address that, too, saying that according to EU data, in 2008 and 2009 — at the height of the global economic crisis — EU exports fell "to all parts of the world except China." He added Beijing has a trade surplus with the U.S. and the EU but deficits with some major Asian trading partners.

Wen also addressed two other European laments: China's tight control of exports of rare earth, minerals that are essential for certain high-tech products and environmental damage from rapid economic growth.

Beijing has to centrally manage the export of rare earth, Wen argued, because uncontrolled exploitation would be detrimental to the environment.

"Some countries are really double-dealing," he added. "Our purpose is really to create sustainable growth for the whole world."